Personal Finance: Ask the Experts: How does my son protect SSI benefits after lawsuit award?

Personal Finance: Ask the Experts

Get advice on money matters from The Bee's Claudia Buck and a panel of local experts

September 12, 2012

How does my son protect SSI benefits after lawsuit award?

Q: My son is on SSI for a mental illness. He is going to have settlement on a lawsuit soon. I understand that in order for him to protect his SSI this settlement must go into a first party trust. Is there any alternative and, if not, can you recommend how I go about setting this up? Thank you. --Lisa, Sacramento, CA

A: Setting up a first party special needs trust (SNT) is one way to protect a person's means-tested benefits, such as SSI and Medi-Cal, after they receive an inheritance or litigation award. Depending on the amount of your son's settlement, he may want to establish his own first party SNT (sometimes called a (d)(4)(A) SNT), or he could join a pooled SNT (sometimes called a (d)(4)(C) SNT). The start-up and administrative costs of the SNT depend on the type and the terms of the trust.

It is critical that you consult an estate planning attorney who has experience with special needs planning as soon as possible. This is a specialty area of estate planning and many estate planning attorneys, including myself, do not have the expertise to answer your questions. The rules in this area are complex, especially if your son is receiving both state and federal benefits. Even a minor misstep could affect your son's continued eligibility for benefits.

An experienced special needs planning attorney can help you work through the benefits and drawbacks of the different types of SNTs and determine the best approach for your son. You can search State Bar or county bar referral lists of estate planning attorneys and look specifically for those who do this type of work. Good luck.

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Claudia Buck is The Sacramento Bee's personal finance columnist. Read all her columns here. Contact her at cbuck@sacbee.com

Terri Carpenter

Terri Carpenter offers advice on job hunting, retraining and career counseling. Carpenter works at Sacramento Works Inc., the career and job training arm of the Sacramento Employment and Training Agency (SETA). With 15 years in the field, she has hands-on experience with everyone from first-time job seekers to career professionals seeking advice after a layoff or looking for a mid-career change. Ask her a question.

Carlena Tapella

Carlena Tapella is a partner in the law firm of Webb & Tapella Law Corp. in Sacramento. The firm specializes in estate planning and probate, such as estates, trusts, conservatorships and litigation. She is a past president of the Sacramento County Bar Association's Estate Planning & Probate Section. Ask her a question.

Kimberly Foss, certified financial planner, is the founder of Empyrion Wealth Management in Roseville. With nearly 30 years in the financial industry, her clients include women in transition, small business owners, retirees and "pre-retirees." Ask her a question.

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